7 reasons to own Men's Wearhouse

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Men's Wearhouse is set to report its first-quarter results Wednesday, after the market close, for the period ended April 30. The company is expected to earn 55 cents on net sales of $593.9 million. In the year-ago quarter, Men's Wearhouse earned 53 cents on net sales of $580.4 million.

On the surface, one might be inclined to avoid Men's Wearhouse given the results from Jos. A. Bank Clothiers. I, however, recently purchased, in late May, shares of Men's Wearhouse.

Here are the 6 reasons I want to own shares of Men's Wearhouse:

1. Jos. A Bank is very promotional. Too promotional, in fact. It is not that Men's Wearhouse is not promotional, but just how long can Jos. A. Bank continue to offer buy-one-suit-get-two-free deals? Men's Wearhouse buy-one-get-one-free promotions from time to time are far less harmful to its margins and bottom line. In general, it seems that Jos. A Bank is always running deep promotions while Men's Wearhouse focuses its marketing on how its clothing will make you look. The problem is more clear when you read reason No. 2.

2. Men's Wearhouse has successfully captured the middle-market men's consumer. The company offers quality fashion at reasonable prices at the company's namesake stores. For consumers who want quality merchandise at discounted prices, Men's Wearhouse's has K&G stores which account for about 16% of company sales. Jos. A. Bank on the other hand has set their targets on the higher-end business person by trying to compete with Brooks Brothers and high-end department stores, such as Nordstrom
JWN, +1.45%
Brooks Brothers is privately held by an Italian investor.

3. Approximately another 16% of Men's Wearhouse sales are derived from tuxedo rentals. This business line is an excellent way to diversify Men's Wearhouse's revenue streams. While Jos. A. Bank offers tuxedo rentals, its business is small compared to that of Men's Wearhouse. The tuxedo rental business tends to be quite local and fragmented. However, Men's Wearhouse has one of the biggest tuxedo rental businesses from coast to coast. Furthermore, with the increasing popularity of same-sex marriages, the opportunity for tuxedo rental sales is certain to increase.

4. Earnings per share for Men's Wearhouse is set to increase 18% in 2012 and 13% in 2013, yet the stock sells for just 12 times current years' estimates. How often can you buy a stock at a PEG ratio of less than 1.0?

5. Men's Wearhouse has no debt and around $125 million in cash and equivalents as of the most recent reported quarter. This is nearly $2.50 per share. Jos. A. Bank Clothiers has an even greater cash hoard but does not pay a dividend of buy back stock. Speaking of dividends, see reason No. 6.

6. Men's Wearhouse pays an annual dividend of 72 cents per share. This equates to a yield of about 2.1%. That dividend was recently boosted from 12 cents per share per quarter to 18 cents per share per quarter. The ex-dividend date is June 8, so you can still capture the most recently announced dividend.

7. This may seem supercilious, but have we seen the end of the "hoodie look" with the Facebook
FB, -0.28%
IPO having failed? An individual's dress does portray an image. The informal look of Mark Zuckerberg may have been right for a bunch of young programmers sitting in a room full of pizza boxes and cans of Red Bull. However, it did not portray an image of maturity and responsibility that employers, customers and investors seek out. Maybe it is time to get back to more formal business attire or at least the clean-cut business casual look. As slight as this phenomena may occur, Men's Wearhouse is certain to help.

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